If you are planning your retirement strategies and looking for an investment outlet that makes sense for your financial needs, you may want to consider a Roth IRA account. These types of account are typically used exclusively for retirement savings. They permit a limited amount of contributions to be made during a tax year. The funds can only be withdrawn after a period of five years has passed since the account was established as long as you are 59 ½ years old or older.
Are You Eligible?
While the Roth IRA account is a beneficial strategy to be used for retirement planning, not all investors will qualify for opening an account. The Roth IRA can be opened by those who earn an income from doing actual work who receive wages, salaries, tips, bonuses and fees on professional services.
There are also limitations on how much one can earn to qualify for opening an account. These income limitations do tend to change and in order to understand your eligibility, you need to review the income limits based on a tax year. For some years, the income limitations have stayed the same but the changes to the limits do tend to increase gradually over time.
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For 2011, the income limitations are described as follows:
For the Singles
Single tax filers are eligible to contribute fully to a Roth IRA account if their income falls below $107,000. Once a single filer’s income goes over that amount, their ability to contribute the their Roth IRA account will be reduced as per the guidelines of the IRS until the income level of $122,000. Once that amount of income is reached, no further contributions can be made during the 2011 tax year towards the Roth IRA account.
For the Married Couples
For married couples that file joint returns, a full contribution into a Roth IRA account is allowable provided their income is under $169,000. Once that amount has been earned, contribution allowances decrease per the guidelines of the IRS. Once an amount of $179,000 has been reached, no further contributions can be made to the Roth IRA for the 2011 tax year.
For married couples that file separate tax returns, contributions made to Roth IRA accounts are much more limited than the other categories. Married, filing separate individuals may only contribute partially to the account if their income is less than $10,000.
Contribution Limits for 2011
The contribution limits for the 2011 tax year have not changed since the previous year. Regular contribution limits for the 2011 tax year stand at $5,000. For those investors over the age of 50, an additional $1,000 is allowed as a ’catch-up’ contribution so they would be permitted a total deposit of $6,000.
The contribution limits established by the IRS are based on the inflation of the economy. To date, the $5,000 limit has been in effective since 2008. The $1,000 catch-up limits of $1,000 have been in effect since 2006.
Start Your Investments Now
If you find you are eligible to start a Roth IRA account, you can check with your local banking institutions to see which offers this type of account. It is generally easy to establish the account and some paperwork is necessary.
The sooner you open the account, the sooner your can start contributing towards your retirement future. Ideally it is best to start retirement savings as soon as you begin working but if it has been difficult just making it from one paycheck to the next, any time is the right time to start planning strategically for retirement.
